The Role of Human Capital in Natural Sustainability and Economic Growth in Indonesia A Dynamic ARDL Approach

Abstract

This study aim to investigate the impact of economic activities on environmental sustainability in Indonesia. In this study, we use the variables of infrastructure, economic growth, and human capital to understand economic activity and the role of human capital in the economy and environmental sustainability. As a measure of environmental sustainability, we use indicators of carbon dioxide (CO2) and ecological footprint (EF) in Indonesia.This study uses annual time series data with a time period of 1985 to 2020. The data consists of various sources. The data is secondary data collected from the Global Footprint Network, Penn World, and World Bank. This research utilized the following two time-series models for the period from 1985 to 2020 for the following variables.The dependent variable in this study is the ecological footprint and CO2 as an indicator of environmental damage. The independent variables in this study are the human capital index (HC), economic growth (EG), infrastructure (Gx), and natural resource depletion (NR) as indicators of economic activity and environmental changes as a result of economic activity.This study adopted the Dynamic ARDL model from Khan et al. (2020). The adoption of the ARDL model in this study aims to examine, simulate and predict the graph of shocks that occur in the independent variables. The results of the analysis using the ARDL approach show that in the long term human capital and natural resources have a negative relationship with CO2, while Economic Growth and infrastructure development have a positive relationship with CO2. Based on the ARDL results, it can be concluded that the role of human capital is very important in preserving nature and infrastructure development needs to be carried out while preserving nature or trying to minimize environmental damage.